Monday, August 31, 2015

34.9 Introducing "Lean at Origin" for Specialty Coffee

Aug. 31, 2015

Today is the start of the "lean at origin" era for the coffee industry. Field research done in May in Rwanda is finally finished and the paper analyzing the data documents both the existence and importance of lean principles for the coffee supply chain. The research process has been grueling as it often is when you've learned a lot. Siphoning and filing down all the new learnings into crisp, clear insights for a paper is a challenge for me.

First, big thanks to Dr. Steven Melnyk, my academic advisor for the project. Dr. Melnyk teaches Supply Chain Management at the Broad College of Business at Michigan State University. He taught my "Sustainable Supply Chain Management" course 1Q 2015, which heavily influenced my thinking during this research. Also, thanks to Dr. Dan Clay, Director, Global Programs in Sustainable Agri-food Systems, for loads of support.

The executive summary is below. But before reading through it, and wondering if this is all a bunch of "ivory tower" hot air, I'd like to share that lean principles are already in action in Rwanda and there is strong interest in applying it further. It isn't called "Lean" yet, but I've seen examples of where Rwanda's smartest frontline managers are implementing lean concepts for coffee production and for the right reasons.

Lean Example: Dakunde Kawa Cooperative, Gakenke district in the North region of Rwanda
  1. In early 2015 a new mill was installed with help from Root Capital. This is one of the few mills outside of Kigali -- indicating the cooperative has quantified the advantages of both less distance between washing stations and mills (reducing wasted time) and improved quality control through the final stages of preparation for export (reducing waste from customer rejects).
  2. Towards the end of the 2014-2015 season, installation of a mechanical density sorter at the front of one of their washing stations replaced the commonly used "float tank." This indicates they are betting on a significant monetary returns through improved quality control of incoming raw material. This is one of the elementary concepts of Lean principles, as reduced defects in raw material eliminates many multiples of waste and lost value as the material moves through the production system. The upcoming 2015-2016 will be an exciting one as it should give a metric on how fast Dakunde Kawa will achieve the return-on-investment (ROI).
  3. Through an individual familiar with the cooperatives operations, I heard the following story. At the end of 2013-2014, the board felt there was a good deal of waste in the amount of laborers they were paying. So for 2014-2015 they took the risky-for-Rwanda decision to let go any laborers they felt were not essential to operations. (The lean term is "eliminating wasted time and talent.") Their operating costs were so significantly reduced, this year the farmers of the cooperative will receive a post-harvest premium of +30 Rwf/kg cherry. The highest the farmers have ever received in the past is +10 Rwf/kg, and +5 is more typical. I.e. farmers are receiving at least a 3X increase on their premium payment! You can bet the cooperative has probably eliminated any acrimony about lost jobs! Indeed, they will probably be hiring as the cooperative's volumes are expected to increase, since farmers can produce more cherry/tree.

So what is this concept of "Lean At Origin"? How can it be routinized, practiced, engrained and scaled up to help cooperatives and private coffee production groups across the coffeelands?  Working with skilled consultants to guide management through the first year of implementation is usually important. An "outside force" has been proven over and over in the manufacturing world to be necessary to break old habits and beliefs that are typically ingrained in organizations.

Here is the executive summary from my paper which just begins to uncover the possibilities for creating a more sustainable supply chain for coffee in Rwanda.

**** Executive Summary from "Lean At Origin: Potential for Sustainable Improvement in Rwanda's Fully-Washed Coffee Production" ****

Today about 50% of RWanda's coffee volume is not making it into the higher-quality fully-washed (FW) channel. This is a serious problem for a small coffee-producing country where farm plots average less than one hecatre of land and ocffee is the country's top agricultural export. Rwanda's characteristics and landscape give it competitive advantages in the specialty coffee market, which demands quality. So the 50% volume that is not entering the FW system represents waste and lost opportunity for Rwanda's national goals and the dreams of individual farming families. Rwanda cannot afford either. Therefore this research will focus on ways to increase the percentage of FW coffee (PFW) with increased quality.

The research focuses on finding root causes for the diversion of coffee cherry away from the FW channel during a critical but limited ‘link’ of the value chain. The focus is on processes from post-picking through the reception process at the washing station (WS).  The analysis of just this process confirms that opportunities exist to improve:

 Using several analysis tools, three broad causes of the low PFW are identified:
1) Lack of understanding about the cherry to parchment (C2P) ratio. As the C2P ratio improves, prices for fully washed coffee deteriorate compared to prices for ordinary coffee from the farmer’s perspective.
2) The distance disadvantage for the FW channel is significant. The requirement to deliver cherry the same day it is picked drives the importance of distance for FW.
3) Problems with managing load. The most dramatic illustration of the load vs. capacity problem is the washing stations in top coffee growing areas refusing deliveries of cherry for two weeks during peak season due to lack of capacity.
 Recommendations for increasing the PFW with increased quality all focus on improving the “flow” of the cherry’s path from tree to the de-pulper. Three suggestions are:
1) Create opportunities for staff at the WS to work with customers and suppliers (farmers) to find insights and identify solutions. A WS needs a tool that is feasible and acceptable. One mechanism is a Kaizen event. It brings people together around a single and focused goal, like measure and eliminate waste in a single process.
2) Explore methods of matching load and capacity at WSs to improve capacity and availability. Using the National Cranberry Cooperative case as an example, a cost model is proposed that can improve planning and scheduling of materials, labor and “open hours” of operations. The model enables scenario analysis of alternative investments.
3) Increase dedication at every level of the chain to 3-5% annual growth in the FW channel. An important step in achieving this is to improve quality standards for cherry delivery to WSs. More precise quality standards for accepting cherry could help achieve quality goals. 
 These recommendations can help Rwanda meet its production goals for fully washed coffee. However, it is important to note that increasing the PFW is not really the end goal. The goal is improved livelihoods for all who invest their energy into Rwanda’s coffee value chain. The future of Rwandan coffee will be driven by those who are innovating and striving to apply new tools to improve productivity, to increase quality and to those who value the contributions of front-line workers and farmers.

[Author: Ruth Ann Church, Artisan Coffee Group]

No comments:

Post a Comment